Pier 1 Is Highly Exposed To Online Competition

Pier 1 Imports Inc PIR reported its fourth-quarter EPS and comps in line with the raised guidance.

BTIG’s Alan Rifkin maintains a Sell rating on the company, with a price target of $3.50.

Q4 Results

Pier 1 Imports reported its operating EPS for Q4 at $0.34, with comps rising 0.2 percent, in line with its March 6 preannouncement when the company had raised the EPS expectations from $0.28–$0.32 to $0.32–$0.34.

Management stated that the unfavorable weather in December and January had hit sales growth by about 180 bps.

2017 Guidance

The company guided to 2017 EPS of $0.46–$0.52, with comps of +1–2 percent, in line with the previous estimates. The 53rd week of 2017 is expected to add $0.02 to the EPS.

Pier 1 Imports expects its merchandise margins to rise 70 bps to 58 percent, while guiding to sales growth of 2–3 percent, including 140 bps growth due to the 53rd week.

Brick & Mortar Versus Online

However, Rifkin mentioned that brick & mortar (B&M), which still accounts for 80 percent of the company’s revenue, continued to comp negatively, and is likely to have comped at (4.7) percent for Q4 and (4.5–5.0) percent for 2016.

Pier 1 Imports expects 20 percent e-commerce growth in 2017, with some improvement in B&M, driven by its loyalty program and ramped marketing.

“We are somewhat skeptical that B&M will improve despite these drivers given the rapid shift towards online. We note that brand traffic decelerated to MSD (mid-single digit) growth in 4Q from 10 percent in 3Q,” the analyst noted.

Rifkin also pointed out that Alasdair James is the lead condition for the position of CEO, and is expected to take over in this position on May 1, with a strategic update likely in early fall.

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Pier 1 Imports Sees FY17 EPS $0.46-$0.52 vs $0.48 Est., Net Sales Growth of 2-3%